Randy Cray column: The 2013 economic indicators for Wisconsin

Randy Cray

People often ask: What do economists look at to judge the direction and strength of the economy? Many variables interest economists.

The "economic indicators" for a region are an important barometer of conditions. The Wisconsin Department of Workforce Development compiles economic indicators to keep track of the Wisconsin economy. Let's look at these and how they have been trending.

The first set of variables is called the Leading Indicators. They are believed to lead overall economic activity. An improvement in these measures means the economy is likely to expand; a decline means an economic condition might worsen. The set includes the following: the Wisconsin composite index for all leading indicators (L1), the average work week in manufacturing (L2), overtime hours in manufacturing (L3), average weekly initial unemployment claims (L4), job openings received (L5) and new business incorporations (L6).

As of May 2013, the composite index for all leading indicators (L1) stood at 103.5. This means the index was 3.5 percent higher than it was in the base year of 1994 which is considered 100. The composite has been trending higher since it bottomed in May 2009 at just 20. The L1 peaked in November 1999 at 129.2, meaning conditions for growth were 29 percent stronger than the base year.

The average workweek in manufacturing (L2) was 40.1 hours in May 2013. The number reached a low point of 38.3 hours per week in May 2009. Since then, (L2) has hovered around 40 hours per week.

Similarly, overtime work in manufacturing (L3), has been around 3.5 hours per week for the last few years. In contrast, during March 2009 in the midst of the recession, overtime hours were only 2.1. The manufacturing sector is commonly looked at because it's considered a good gauge of the overall economy's future direction.

The number of initial unemployment claims has improved greatly over the past four years. Average weekly initial unemployment claims (L4) were 11,044 in May 2013. This is in sharp contrast to the 28,166 claims filed in August 2009.

Steady improvement in the number of job openings received by the state Workforce Development department has occurred since the height of the recession. Job openings received (L5) totaled 18,967 in May 2013. In May 2009, the number was just 5,520.

New business incorporations (L6) reached 248 in May 2009. Strangely, this number has not changed much in the past four years. For comparison, in 2000, new incorporations totaled 608.

The leading economic indicators suggest the Wisconsin economy will continue to see steady, but modest, improvement over the next six months.

A second group of variables used by economists is the Coincident Indicators. Coincident indicators deal with current economic conditions. They include the unemployment rate (C2), gallons of motor fuel taxed (C3), new car registrations (C4), electric power sales (C5), manufacturing employment (C7), average weekly earnings in manufacturing (C8), cash receipts - farm marketing (C9) and contract construction employment (C10).

Taken together, the values for these coincident variables indicate that a steady improvement has taken place in Wisconsin's economy. Most would argue that progress has been slow, but it has occurred.

Randy Cray, Ph.D., is the chief economist at the University of Wisconsin-Stevens Point's Central Wisconsin Economic Research Bureau.

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Randy Cray column: The 2013 economic indicators for Wisconsin

People often ask: What do economists look at to judge the direction and strength of the economy? Many variables interest economists.

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